Transparency Key To Brand Management
Nearly nine out of 10 millennial investors want sustainable investments. ESG-related instruments have already attracted $35 trillion. The sector will likely exceed $53 trillion by 2025. A recent study found that millennials are twice as likely to invest in companies targeting social or environmental goals, while 72 percent of Gen Z believes in responsible investing. In response, many organizations are embracing sustainability as part of brand management. Many companies now see environmental, social, and governance (ESG) reporting, as a tool to attract customers, investors and financing. It’s also a benchmarking tool that helps stakeholders find the best corporate performers.
Unlike the more elusive claims of sustainability and corporate social responsibility (CSR), ESG reporting is more rigorous and more formal. ESG involves the disclosure of environmental, social and corporate governance data—not just plans and ideals. As with all disclosures, it sheds light on a company’s ESG activities while improving investor transparency and inspiring other organizations to do the same. ESG promotes the disclosure of actual and potential impacts of climate-related risks and opportunities on the organization’s businesses, strategy, and financial planning where such information is material. It helps companies disclose how the organization identifies, assesses, and manages climate-related risks.
In a recent survey, EY found that 82 percent of CEOs embrace ESG as a strategic opportunity. ESG strategy can help a company build customer loyalty, attract and retain loyal employees, attract capital and more.
“ESG is Brand Management 101,” said Gary Chandler, CEO of Crossbow Communications. “We should be leary of any company that doesn’t promote transparency and efficiency.”
As ESG’s popularity grows, its critics become louder. They claim that scoring a company on these metrics is subjective. They claim that ESG ratings rarely inspire meaningful change. Unfortunately, they have been used to cover up environmental crimes.
There are plenty of incentives for unscrupulous companies to lie. The Security and Exchange Commission (SEC) created a Climate and ESG Task Force to help identify misconduct. It also created a website to receive ESG-related tips, referrals, and whistleblower complaints.
The key is to maintain safeguards, ask tough questions and invest in better reporting. We must define what constitutes material information. We need standardized frameworks and definitions for issues such as climate impact, human rights, and income inequality. Transparency and consistency are essential. Failure isn’t an option.
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